UnitedHealth says may restate results

Stock-option practices could force adjustments

By

RussBritt

LOS ANGELES (MarketWatch) -- Controversial stock-option granting practices may force UnitedHealth Group Inc. to restate up to $286 million in net income over the last three years, the company said Thursday in a regulatory filing.

The health-insurance giant also said that the Securities and Exchange Commission is conducting an informal inquiry into its option-granting practices. The company has appointed a special committee and counsel to look into the matter, the filing added.

Shareholders have accused the company of granting options to Chairman and Chief Executive William McGuire and other executives at times when UnitedHealth shares were at depressed levels and ready to make a run.

The "strike price" of the shares, or the level at which they were granted to executives, would then be favorable and more likely to yield a profit.

Minnetonka, Minn.-based UnitedHealth
UNH, +0.99%
faces a rash of lawsuits over the practice, including six derivative complaints and one class action. Many of the complaints have been filed within the last two months.

"At the conclusion of the company's independent review and the Securities and Exchange Commission's informal inquiry, the company could be subject to regulatory fines or penalties or other contingent liabilities," UnitedHealth's filing said.

UnitedHealth spokesman Tyler Mason noted that word of the probe comes after an April filing in which the company mentioned that the SEC had called UnitedHealth executives regarding its stock options.

"All we've received at this point is a phone call," he said.

Mason said the potential restatement is the maximum that the company could face after it examines 12 years of stock option grants.

The result restatement could cut as much as $150 million in net income, or 11 cents a share, from UnitedHealth's 2005 results. Another 6 cents and 4 cents a share could be cut from profits for 2004 and 2003, respectively.

Noncash adjustments to earnings may be needed according to accounting principles, the company said in its filing.

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